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October 19, 2012 9:37 pm

Supreme Court likely to combine K-Dur and AndroGel pay-for-delay cases

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The US Supreme Court will likely consider two pay-for-delay cases, K-Dur and AndroGel, in a single consolidated proceeding, according to two Washington-based attorneys specializing in healthcare and antitrust.

The K-Dur case is a 3rd Circuit private pay-for-delay suit filed in 2006 by purchasers of Schering-Plough’s branded potassium supplement, called K-DUR 20, which is used to treat high blood pressure. Schering, which is now owned by Merck (NYSE: MRK), reached an agreement with Upsher-Smith in 1997 to delay entry of a generic version of the medication.

The Federal Trade Commission (FTC), which filed an amicus brief in the case, previously brought suit over the K-Dur agreement and lost in the 11th Circuit. When the FTC asked the Supreme Court to hear the case, the Department of Justice (DoJ) opposed the FTC’s petition, the only time in history that has happened. The Court denied the petition for cert.

The AndroGel case involves an FTC complaint, filed in 2009, over agreements Solvay Pharmaceuticals struck with Watson Pharmaceuticals (NYSE: WPI), Par Pharmaceutical Companies (NYSE: PRX), and Paddock Laboratories. Solvay, the maker of the low testosterone treatment AndroGel, is now owned by Abbott Laboratories (NYSE: ABT); and Paddock was acquired by Perrigo (NASDAQ: PRGO).

“I would think the Court will likely take both cases and consolidate the argument,” Katherine Funk, a partner at Baker & McKenzie, wrote in response to questions emailed by PaRR.

“Given that the Solicitor General requested cert in the AndroGel case and the Court grants cert in something like 75% of those requests, it would seem the odds are likely that the AndroGel case will be accepted,” Funk noted. If the Court takes the AndroGel case, it will likely also take K-Dur, she added.

Laura Shores, a partner at Pepper Hamilton, said she also expects the Supreme Court to take the two cases together.

According to Shores, the K-Dur case should be of particular interest to the Court. “[T]here’s a split in the circuits in K-Dur itself – the exact same settlement that was declared to be presumptively unlawful by the 3rd Circuit in K-Dur was declared to be lawful by the 11th Circuit when the FTC challenged it,” she explained.

Shores helped defend Schering in the 11th Circuit K-Dur case, and Pepper Hamilton is currently involved in other pay-for-delay litigation.

Pay-for-delay agreements, also called “reverse payment” settlements, typically take the form of compensation from a brand-name company to a generics company in exchange for keeping a generic replica drug off of the market.

Supporters argue the settlements are legal and help protect patents. Opponents of the agreements, including the FTC and the DoJ, say that reverse payment deals harm consumers by reducing competition and thereby inflating drug costs.

Shores noted, “The tension here is between the patent laws and the antitrust laws. When both come into play, it boils down to a question of which of the two you favor.”

The Supreme Court will take up the issue if four justices vote in favor of granting cert.

Although the outcomes of K-Dur and AndroGel remain uncertain, Justice Samuel Alito, who previously served as a judge in the 3rd Circuit, may have particular motivation to bring the K-Dur case to the Court.

When he was at the 3rd Circuit, Alito strongly disagreed with Judge Dolores Sloviter, who wrote the K-Dur opinion, in the case of LePage’s Inc. v. 3M (NYSE: MMM), which involved bundled discount programs.

In LePage’s, Sloviter and Alito were on opposite sides of a three-judge panel in which Alito and another judge reversed the District Court’s judgment. The case went to a rehearing by the full circuit court which reversed the panel opinion -- Sloviter wrote the majority opinion.

In an analysis by Arnold & Porter in 2003, the law firm described the LePage’s decision as “troubling” and “fail[ing] to grapple” with the fundamental issue of the case.

Response briefs in the K-Dur and AndroGel cases are due 5 November, which means the Supreme Court will likely decide on 30 November or 7 December whether to grant cert. If the Court grants cert in either or both cases before the end of this year, the Court would almost certainly issue a decision on pay-for-delay agreements by the end of the current term in June.

In the meantime, other pay-for-delay cases may effectively be on hold. A 3rd Circuit case involving Provigil, the brand-name version of modafinil manufactured by Cephalon, has already been stayed. Separate 3rd District suits over GlaxoSmithKline’s (NYSE: GSK) Lamictal, Wyeth’s Effexor and Pfizer’s (NYSE: PFE) Lipitor may also be stayed, though attorneys participating in those cases said further developments may depend on the timing of K-Dur. Wyeth is owned by Pfizer, and Cephalon is owned by Teva (NYSE: TEVA).

“Everybody expects the Supreme Court will decide” within the next month or so whether to hear the K-Dur case, explained John Macoretta, an attorney involved in the Effexor suit.

If the Supreme Court were to affirm the 3rd Circuit’s ruling, pay-for-delay settlements would become presumptively illegal. Not only would this curtail future pay-for-delay deals, but it would also apply to past settlements within the statute of limitations.

On the other hand, a Court ruling in favor of the drug makers would force pay-for-delay opponents to address the issue through legislation, which so far has stalled.

According to Shores, Congress is unlikely to pass legislation that limits pay-for-delay deals as long as Republicans control at least one chamber of Congress.

And in contrast to a potential Supreme Court ruling, any legislation on reverse payment settlements would not have a retroactive impact.

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